People know that they have to write a financial plan if they want to launch a successful business. It is mandatory indeed, but do not try to anticipate 10 years. Start by working on your forecast of sales, costs, profits and assets for the first year or two..
Here are the 3 most important factors you need to consider if you want your retail business to be effective and profitable.
- Figure out your business costs
Now that you know in which neighborhood you will open your store, you need to figure out how much money you have to invest. This process is essential if you want your business to become successful. Here are some expenses you should examine:
• Operating and administrative expenses: office suppliers (computers, phone, cash machine…), inventory, real estate broker, insurance, etc
• Marketing and advertizing expenses: brand identity (name, logo etc.), opening event expenses advertising (flyers, coupon, TV, radio), web & social networks (Learn more to have more information)
• Human Resources: salary and wages (Learn moreto have more information)
• Legal Fees: license, permit, registration, accountant, taxes, etc.
- How long before your business is profitable?
Above all, you should forecast a budget (approx. 50%) knowing that your business won’t be profitable before a few months, sometimes years. Anticipate, at least, 18 months of negative cashflow. You don’t want to be forced to close your store because you did not anticipate enough cash to pay yourself a decent salary.
Along with a bad location, early challenging cashflow is one of the two main reasons why retailers fail. Working with Potloc can really help you manage both challenges as running a crowdsourcing campaign will help you to create a database of customers before opening, in addition to indicate you the best location.
- Obtaining funds
Once you know your launching costs, you must find out where to find this capital if you want to get your business up and running.Below are some options you may consider:
• Personal savings: if this store is your dream, you could have been saving money for years. If you have enough funds, you could start your venture without getting into too much debt.
• Love money. You can ask your family & friends for some help: they can loan you the money or you can ask them to join your business and become an investor. But be careful, it could be touchy!
• Bank loan: it is the most popular way to finance your retail project. Overall, you have to provide your credit history, financial statements, business plan, projections and personal guarantees. But the interest rates and other requirements will vary depending on the financial institution.
• Business angel: an investor who provides financial backing usually in exchange for equity. You will have to create an elaborated business plan and pitch your idea against other start-ups.
• Government assistance or business associations: Some organizations provide financial assistance to eligible businesses.
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